Managing Money New to Investing? Don't Let These 6 Myths Stop You

by the editorial team at Citi | September 11, 2023

The number of Americans who own stocks is on the rise, but the decision to invest your money is personal, and there's not always a clear answer. That's why it's helpful to look at the facts. 

In an April 2023 Gallup poll, 61% of U.S. adults said they own stocks — an increase from 56% in 2021 (and the highest rate since 2008.) Even so, not everyone is active in the market. For some people, it may be because they don’t feel they fit the “mold” of a typical investor or are swayed by other misconceptions.

To help you figure out if investing is right for you, we’re sharing six common myths, plus advice on how to move past them.

1. Myth: Getting started is difficult.

Many people think they need access to a top advisor to oversee their investments, but the rise of mobile trading apps and robo-advisory services have made managing a portfolio easier than ever.

“Many of today’s apps offer clean and easy-to-use interfaces and various useful functionalities, and most importantly, they’re free,” says Tyrone Ross, who operates a San Diego-based financial consultancy called 401 Financial. “My clients use them for everything from monitoring their investments to tracking and budgeting.”

2. Myth: Investing is too expensive.

Think you need a lot of money just to open a trading account? Or that the best-performing investments cater to the top 1%? Neither are true. Brokerages have tamped down fees and minimum account balances in recent years, allowing people to invest with a few hundred dollars.

Not all funds are expensive either. While some mutual funds — a basket of securities run by an experienced portfolio manager — charge 1% to 2% in fees, you don’t have to look far to find inexpensive and efficient options. Exchange-traded funds (ETFs), for instance, deliver transparency, flexibility and tax efficiency at a fraction of the cost of actively managed funds. (Keep in mind that asset allocation and diversification do not guarantee a profit or protect against loss.)

Business woman using cellphone in office

3. Myth: Investing requires a complex strategy.

There may be a perception that only expert investors are successful, but what many people forget is that passive investments — those that track an index or an industry sector — have actually beaten out some actively managed funds over the past decade. That means that a complex strategy isn’t necessarily going to outperform a basic approach.

Keep in mind, though, that investing is much more than just picking stocks. You’ll want to think about how to diversify, manage risks and distribute your assets.

4. Myth: Only practice makes perfect.

You may know people who spend their weekend poring over financial statements and running spreadsheet models, but the truth is, that’s not necessarily the key to investing wisely.

What you need is a financial plan. Working with a financial advisor can help you establish appropriate savings goals, develop a retirement strategy and create a long-term investment plan. An advisor will develop an intimate knowledge of your finances and can then recommend assets to help you reach your long-term goals.

“I like to start with the three Es: exposure, education and empowerment,” says Ross. “A lot of times people just don’t know what’s available, how to get started and where to turn at major life milestones.”

A woman makes calculations while reviewing her finances

5. Myth: The market is a rollercoaster.

When major stock market indexes hit a rough patch, it’s natural to think that the next big recession is around the corner. You might recall past downturns when markets contracted, unemployment rose and the economy appeared shaky.

Yet regular corrections can be healthy, and history has shown the market has moved higher more often than not. (Of course, past performance is not an indicator or any assurance of future growth, and because the market can be volatile, there are always financial risks to investing.)

If you maintain a long-term outlook, you may be more likely to enjoy the growth that the market can provide over time with much less stress. One way to do that is with a systematic approach like dollar cost averaging, which entails investing a fixed amount each week, month or quarter.

6. Myth: Investing is a moral minefield.

If you’re wary of where your money will be going, consider that many publicly traded companies prioritize creating long-term value for shareholders while making a difference in the community. You can check both these boxes with an investment in an ESG fund or company, for example.

Look for companies that incorporate environmental, social responsibility and governance policies from the C-suite down to first-year analysts, or simply search for a list of Certified B Corporations, which balance purpose and profit.

 

— With additional reporting from Life and Money by Citi editors.

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This is for educational purposes only and the views expressed here are those of the author and do not necessarily reflect those of Citi.

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* An ETF, or exchange traded fund, combines aspects of mutual funds and conventional stocks. Like a mutual fund, an ETF is a pooled investment fund that offers an investor an interest in a professionally managed, diversified portfolio of investments. But unlike mutual funds, ETF shares trade like stocks on stock exchanges and can be bought or sold throughout the trading day at fluctuating prices. ETFs can vary, including in their regulatory structure, management style, investment objectives, and indices tracked.

Asset allocation, diversification and dollar cost averaging do not guarantee a profit or protect against loss.

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This article is for informational purposes only; please consult your advisor to determine whether this strategy is right for you.

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